Big U.S., European Arms Makers Among Contractors With Inadequate Evidence of Anticorruption Measures -- Survey

   By Robert Wall 

LONDON--Major U.S. and European weapons makers are among a large majority of big defense companies that lack adequate public evidence of anticorruption practices, according to a new survey by antifraud advocacy group Transparency International U.K.

Out of 163 companies surveyed in 47 countries, 107 fell in the bottom half of Transparency International's latest ranking, with 57 garnering an "F" rating that suggests almost a complete absence of evidence of having openly available information on their anticorruption activities. Companies such as French combat jet maker Dassault Aviation SA (AM.FR) and U.S. drone producer General Atomics are in the bottom ranking, according to Transparency International U.K.

When the index was introduced in 2012, two-thirds of companies, the same as this year, did poorly. Still, Mark Pyman, director of the defense and security program at Transparency International U.K. said there are signs companies are looking to improve.

The number of weapons makers in the top two categories rose to 26 from 10. "I'm astonished by the level of progress," Mr. Pyman said. The high percentage of failing grades partly reflects the addition of the number of companies under review and tougher criteria, he said.

Defense companies have often been the subject of corruption probes. Executives of Boeing Co. (BA) have gone to prison over illegal business dealings. Britain's Serious Fraud Office is looking into illegal business activities at an Airbus Group NV (AIR.FR, EADSY) unit, and Finmeccanica SpA (FNC.MI) last year entered a settlement with Italian prosecutors over a helicopter deal to India, without admitting wrongdoing.

"Corruption is a cancer and if we don't chip away at it we are going to pay a very heavy price," George Robertson, the former NATO secretary general that has backed the effort said in an interview. The index is starting to influence the thinking of government buyers, he said

Mr. Pyman said the arms-sales sector, once ranked among the most prone to corruption, has shed that status in recent years as antibribery measures in many countries have taken hold. Still, Transparency International recommended governments consider a firm's anticorruption measures as they decide from whom to buy equipment.

The advocacy group builds its index both on publicly available information and what companies are willing to share about their internal processes. Mr. Pyman said that since the last survey was undertaken, companies have become far more open to discussing the topic.

"The index did influence our decision to make more information available," said Timothy Schultz, vice president for ethics and business conduct at Raytheon Co. (RTN) The company, which felt it had strong anticorruption practices already in place made more of its internal processes public, he said. As a result, Raytheon jumped to an "A" rating in this year's index from a "C" grade in 2012.

Transparency International, which also ranks governments' anticorruption practices in arms deals, plans to update that index before year end.

   Write to Robert Wall at [e-mail] 

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